As labour consultants and HR Managers, we are confronted with issues that, on the face of it, fall within the ambit of both operational requirements and incapacity. These blurred lines result in an inability to establish whether the process contained in Section 189 of the Labour Relations Act, 66 of 1995 (LRA) or the process prescribed by Schedule 8 Code of Good Practice: Dismissal (Schedule 8), should be followed. The latter decision usually goes along with fear and anxiety as the incorrect decision may lead to an unfair dismissal dispute with significant financial implications. It is therefore of paramount importance that one understands the principles underpinning incapacity and operational requirements.
Section 213 of the LRA defines operational requirements as follows: ‘“Operational requirements” means requirements based on the economic, technological, structural or similar needs of an employer.’ The substantive rationale behind operational requirements typically involves measures adopted by the employer to cut costs or improve profit or in order to restructure its business or alter the manner in which its employees work, to meet an operational imperative. Many labour attorneys have successfully argued that the courts have defined the term “or similar needs of an employer” broadly so that it is not limited to measures adopted by the employer to cut costs or improve profit. In the case of Tiger Food Brands t/a Albany Bakeries v Levy N.O and others (2007) 28 ILJ 1827 (LC), where operational requirements were invoked in the case where employees’ violent threats prevented the plant from resuming production as the employer was unable to pursue a dismissal for misconduct because of lack of evidence, the court held that dismissal on the basis of operational requirements was substantively and procedurally fair.
Incapacity is not defined in the LRA, but usually involves a failure to meet the required performance standards due to ill health or injury. Another form of incapacity arises in circumstances where the employee is unable to perform his duties due to legal constraints such as a lack of required accreditation, or where the employee may be prevented from rendering service due to incarceration. This view was confirmed in the case of Samancor Chrome Ltd (Tubatse Ferrochrome) v Metal and Engineering Industries Bargaining Council and others (2010) 31 ILJ 1838, where the court rejected the contention that incapacity only arises in cases related to ill health, injury or performance. In this case the employee’s incapacity stemmed from his lengthy incarceration and consequent inability to perform his job.
In the case of Jabari v Telkom SA (Pty) Ltd (2006) 27 ILJ 1854 (LAC) the court, relying on Du Toit Labour Relations Law (4ed) at 402, found that incompatibility was a species of incapacity as it relates essentially to the subjective relationship of an employer and the co-workers within an employment environment, regarding an employee’s inability or failure to maintain harmonious relationships with his peers. The implications of this judgement is that incapacity extends beyond the narrow confines of the term, incapacity, in terms of Item 10 of Schedule 8. Prof Brassey SC’s commentary on the Labour Relations Act at para A8 – 76, which has been approved by the Labour Appeal Court (LAC) in Samancor supra, reads that “Incapacity may be permanent or temporary and may have either a partial or complete impact on the employee’s ability to perform the job. The Code of Good practice: Dismissal conceives of incapacity as ill-health or injury but it can take other forms. Imprisonment and military call-up, for instance, incapacitate the employee from performing his obligations under the contract. The dismissal of an employee in pursuance of a closed shop is for incapacity; so is one that results from a legal prohibition on employment”.
It is easily observed that the some issues may fall within the ambit of both incapacity and operational requirements. The most recent case in point is that of First National Bank v CCMA & Others (Case No JR147/2016) where FNB dismissed an employee, following an incapacity inquiry, for consist failures to comply with the “fit and proper” requirements of the Financial Advisory Intermediary Services Act, 37 of 2002 (FAIS). The employee was an Authorised Financial Services Provider for purposes of the FAIS, and the FAIS categorically stated that in terms of the “fit and proper” requirements, the representative must have successfully passed the relevant first and/or second level regulatory examination(s) as may from time to time be set by the Registrar. In short, the employee attempted to pass the RE1 examination on fifteen occasions from 30 September 2004 to the deadline on 31 December 2015, however he had failed to do so. The employee attended several workshops and underwent electronic training aimed to prepare the employee to pass the RE1 examination during the aforementioned period. Thereafter, FNB sent the employee an email informing him of two positions in Port Elizabeth not affected by the FAIS Act for which he could apply. The employee applied for one position, however his application was unsuccessful due to the fact that a better-suited candidate was appointed. FNB then directed the employee’s attention to the electronic system known as iRecruit for further vacancies. The employee only applied for one position because the other positions, according to him, were in more remote parts of Port Elizabeth. The employee lived in Humansdorp which was approximately 90 km away from Port Elizabeth.
After finding that there were no alternative roles for the employee, FNB dismissed the employee because of incapacity. The employee challenged his dismissal, and the Commissioner found that the employee’s dismissal was substantively unfair, and that he must be reinstated in any suitable position. The Commissioner held that the employee was dismissed for incapacity arising from his failure to attain a standard imposed by law in respect of his continued employment in the position he was contractually obliged to fill, but ought to have been dealt with as a dismissal for operational reasons and not as one for incapacity. The Commissioner argued that incapacity was a result of supervening impossibility to perform, this being outside the control of the employee, and not due to ill-health or injury. The Commissioner argued that this was in line with the arguments by Dr John Grogan that such cases of incapacity that falls outside the provisions of Schedule 8 of the LRA, should be dealt with as other forms of dismissal, and not as incapacity. The Commissioner argued that the FAIS requirements had become an integral part of FNB’s operations, and that FNB should thus have dealt with the employee’s failure to pass the regulatory examination as an issue of operational requirements.
FNB therefore sought to have the award substituted with a decision that the dismissal was both procedurally and substantively fair. The Labour Court held that the Commissioner committed an error of law when he held that the only forms of incapacity are ill-health and injury. The Court further held that the Commissioner committed an error in law in finding that the dismissal of the employee was based upon the operational requirements of FNB because in law it could not have been for incapacity. The Court based its finding on the fact that the requirements of section 189 of the LRA militate against a dismissal where an employee becomes incapacitated from being employed because of a statutory prohibition. The Court stated that a provision such as section 189(3)(d) of the LRA demonstrates the inapplicability of this procedure to dismiss an employee who is legally not permitted to be employed. The Court held that the Commissioner was not at liberty to change the category of grounds for dismissal. The Court concurred with the dictum in the case of Sidumo v Rustenburg Platinum Mines Ltd & Others [2007] 12 BLLR 1097 (CC) where the Constitutional Court emphasised that: “In terms of the LRA, a Commissioner has to determine whether a dismissal is fair or not. A commissioner is not given the power to consider afresh what he or she would do, but simply to decide whether what the employer did was fair. In arriving at a decision, the commission is not required to defer to the decision of the employer. What is required is that he or she must consider all relevant circumstances.” The Labour Court accordingly substituted the award dated 22 June 2016 with an award that FNB dismissed the employee for a fair reason and in accordance with a fair procedure.
It therefore seems appropriate that the line between operational requirements and incapacity should be drawn where the employer determines or acknowledges the need to restructure its business and not where the employer cannot employ an employee because of a statutory provision prohibiting such employment. One needs to consider that the focus in terms of incapacity is on the qualities of the employee, whereas in operational requirements the focus is on the employer and its decisions relating to its business.
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